The price pays about 10 times a profit rate that is already at a peak. We expect profit to level off near KRW 190 trillion a year and the multiple to stay low for a cyclical business. Target $127.84.
Key points
- KRW 60.5 trillion operating profit in Q2 2026, up from KRW 9.2 trillion a year earlier.
- About 10 times annualized after-tax earnings is what $178.41 pays today.
- $127.84 probability-weighted target, 28% below the price.
The call
The price requires Q2 profit to hold. At $178.41 the company is worth about $1.29 trillion. That is about 10 times Q2 earnings at an annual rate. It needs the current peak to last.
Operating profit per quarter (KRW trillions)Source: company releases, Oct 2024 to Jul 2026
We believe profit levels off. Memory is cyclical: prices rose in Q2 by a mid-30% rate for DRAM and a mid-50% rate for NAND. We assume KRW 190 trillion of operating profit a year, below the Q2 pace. Big capacity additions are coming, with KRW 61 trillion of commitments.
Valuation
| Step | Figure |
|---|
| Base operating profit | KRW 190 trillion a year |
| After 22% tax, times 9 | KRW 1,334 trillion |
| Plus net cash (excluding long-term investments) | KRW 69 trillion |
| Base value per ADS | $133.40 |
| Bust $95.60 (25%), bull $177.20 (30%) | |
| Weighted target per ADS | $127.84 |
Nine times is a fair multiple for a memory maker at high profit, since profit usually falls back. The bull case only gets you to today's price, while the bust case loses 46%. That asymmetry makes this a sell. The share count is uncertain, with the July share issue and buybacks both moving it.
Risks
- Long-term supply contracts hold and AI demand keeps prices rising. Watch DRAM spot prices and Q3 results.
- The KRW 40 trillion buyback shrinks the share count. Watch completion reports before November 19.
- Reported net income includes large investment gains, so earnings are noisy. Watch the Solidigm financing decision.
What would change my mind
Q3 operating profit above KRW 75 trillion with signed supply contracts that include prepayments would lift my base profit.